On August 21, People’s Bank of China Governor, Pan Gongsheng, knew that spectators everywhere were braced for a major easing.

The PBOC remains poker face and makes market spectators nervous guessing. (Photo: siamblockchain.com

At some point, investors may think that Chinese authorities and the People’s Bank of China may be toying with global markets.

According to Asia Times, People’s Bank of China governor, Pan Gongsheng, has surprised markets with restraint, though People’s Bank of China has trimmed its one-year lending rate, their five-year rate has remained the same.

The risk is that the “disappointing” size of the People’s Bank of China’s loan prime rate cut on Monday would not help in building confidence as Chinese officials attempt to stabilize the sliding GDP, according to economist Maggie Wei.

President Xi Jinping and the People’s Bank of China governor, Gongsheng, are grappling more than a Covid reopening, global uncertainty is reducing the demand for Chinese goods at the same time domestic opening like record youth unemployment are complicating the efforts to revive China’s slumping markets.

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The odds are such that the People’s Bank of China lowering their one-year loan prime rate again on top of last Monday’s cut.

Union Bancaire Privee economist, Carlos Casanova, said that it is expected that the People’s Bank of China will follow through the additional 50 to 70 basis points in reserve-requirement ratio cuts. 

All of this could change if global investors decide that the People’s Bank of China that is under Pan Gongsheng is asleep at the wheel. That alone could help in accelerating the yuan’s decline, putting the property developers with high ratios of dollar-denominated in harm’s way.

President Xi Jinping’s balancing act is a tantalizing one. Xi is resisting of bailing out developers and other key sectors in the country like they did in 2009 and 2015. Instead, Xi’s economic team is focused on Beijing’s bigger plans to squeeze leverage out of the system and for the nation to grow better and not just faster. This is a risky approach, particularly as the People’s Bank of China is attempting to wean the economy off of Japan-like monetary policies.

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